Is grad school actually worth it?

How this calculator works

What the model compares

The calculator runs two versions of the same person over the same number of years. In the first, you keep your current job and your salary grows at the rate you set. In the second, you stop earning for the length of the degree, pay for it, then re-enter at your expected post-degree salary and grow from there. The answer is the gap between the two cumulative totals at the end of the simulation.

Both paths are discounted to present value at the rate you choose, because money you earn in year twelve is worth less to you than money you earn next year, and a comparison that ignores that flatters the degree.

What counts as the cost

The cost of a degree is larger than its price. The model adds three things together and calls the total your investment.

• Tuition, minus funding. Scholarships, bursaries and employer contributions come off the top as a percentage, so a fully funded place costs nothing in tuition and still costs you the rest.
• Living expenses for every year you study. Rent and food do not pause because you are enrolled, and leaving them out is the most common way a back-of-envelope calculation goes wrong.
• The salary you do not earn while studying. This is the opportunity cost, and for anyone already working it is usually the biggest single number on the page. It compounds at your current growth rate, because the raises you would have had are forgone too.

The assumptions you can argue with

Three inputs exist because the optimistic version of this calculation is the one most people run by default, and it is wrong in predictable directions.

• Time to employment. Graduating is not the same as being paid. Months spent searching after the degree ends sit in the model as months of zero income.
• Confidence in the salary figure. Your expected post-degree salary is scaled by how sure you are of it. Eighty percent confidence means the model plans for eighty percent of the number you typed.
• Career break risk. Stepping out of a field and back into it costs something on re-entry. Switching this on applies a further ten percent haircut to post-degree earnings for the whole simulation.

How to read the verdict

Payback year is the first year in which the cumulative discounted earnings of the degree path overtake the no-degree path. The break-even salary is the lowest post-degree salary at which the degree path ever overtakes the other one, so it is the number to check a job board against before you enrol.

• Strong ROI. The investment pays back within four years of graduating and returns more than fifty percent over the simulation.
• Borderline. It pays back, but takes up to eight years past graduation to do it, and the total return is thin enough that a small miss on salary erases it.
• Financially weak. The degree path never overtakes the alternative inside the years you are simulating.

What the model does not tell you

This is an earnings comparison, and earnings are one reason among several to study. It cannot price the work you would rather be doing, a licence you cannot practise without, or a field you can only enter through a postgraduate route. It also assumes the role you are aiming at is the right one for you, which is the assumption worth testing first, because a well-funded degree pointed at the wrong career still leads to the wrong career.

This model assumes your target role is the right one.

If you are unsure, validate the career path first. It is the single biggest variable in your ROI.

Find your best-fit career path